Avenida Del Libertador 6363

Ciudad de Buenos Aires, C1428ARG

Buenos Aires, Argentina
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

*    Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

__________

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: N/A

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 462,292,111 Class A Common Shares, 442,210,385 Class B Common Shares and 1,952,604 Class C Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934.  Yes o No þ

Note:  Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:  U.S. GAAP o
International Financial Reporting Standards as issued by the International Accounting Standards Board þ Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 o Item 18 o

 

 

 

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PART I

Item 1.         Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2.         Offer Statistics and Expected Timetable

Not applicable.

Item 3.         Key Information

In this annual report, except as otherwise specified, references to “we”, “us”, “our” and “the Company” are references to (i) Empresa Distribuidora y Comercializadora Norte S.A., or “Edenor”, on a standalone basis prior to March 1, 2011, (ii) Edenor, Empresa Distribuidora Eléctrica Regional S.A. (“Emdersa”) and Aeseba S.A. (“Aeseba”), between March 1, 2011 and March 31, 2013, (iii) Edenor and Emdersa”, between March 1, 2011 and September 30, 2013, and (iv) Edenor on a standalone basis, from October 1, 2013 through the date of filing of this annual report. References to Edenor, Emdersa and/or Aeseba on a standalone basis are made by naming each company as the case may be. For more information, see “Item 4 - Information on the Company - History and Development of the Company.”

FORWARD‑LOOKING STATEMENTS

This annual report includes forward‑looking statements, principally under the captions “Item 3. Key Information - Risk Factors”, “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects”. We have based these forward‑looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business.  Forward‑looking statements may also be identified by words such as “believes,” “expects,” “anticipates,” “projects,” “intends,” “should,” “seeks,” “estimates,” “future” or similar expressions. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ materially from those expressed or implied in our forward‑looking statements, including, among other things:

·         the outcome and timing of the integral tariff revision process (Revisión Tarifaria Integral or “RTI”) and, more generally, uncertainties relating to future government approvals to increase or adjust our tariffs;

·         general political, economic, social, demographic and business conditions in the Republic of Argentina, or “Argentina” and particularly in the geographic market we serve;

·         the impact of regulatory reform and changes in the regulatory environment in which we operate;

·         electricity shortages;

·         potential disruption or interruption of our service;

·         restrictions on the ability to exchange Pesos into foreign currencies or to transfer funds abroad;

·         the revocation or amendment of our concession by the granting authority;

·         our ability to implement our capital expenditure plan, including our ability to arrange financing when required and on reasonable terms;

·         fluctuations in exchange rates, including a devaluation of the Peso;

·         the impact of high rates of inflation on our costs;

·         our ability to access to financing under reasonable terms; and

·         additional matters identified in “Risk factors”.

 

 

 

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Forward‑looking statements speak only as of the date they were made, and we undertake no obligation to update publicly or to revise any forward‑looking statements after we file this annual report because of new information, future events or other factors. In light of these limitations, undue reliance should not be placed on forward‑looking statements contained in this annual report.

SELECTED FINANCIAL DATA

The following tables present our summary financial data for the years ended December 31, 2014, 2013, 2012 and 2011. This information should be read in conjunction with our audited financial statements as of December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014 (the “Financial Statements”), the related notes thereto and the information under “Item 5. Operating and Financial Review and Prospects.ˮ included elsewhere in this annual report. The financial data as of December 31, 2014, has been derived from our Financial Statements.

Our 2014 financial statements have been prepared in accordance with IFRS, as issued by the IASB, and these have been approved by resolution of the board of directors’ meeting held on May 8, 2015.  See “Item 18 – Financial Statements”.

The selected statement of comprehensive (loss) income data for the years ended December 31, 2014, 2013, 2012 and 2011, and the selected statement of financial position data as of December 31, 2014, 2013, 2012 and 2011 have been prepared in accordance with International Financing Reporting Standards (“IFRSˮ), as issued by the International Accounting Standards  Board (“IASBˮ), and have been derived from our financial statements, which were audited by Price Waterhouse & Co. S.R.L. (“PwC”), member firm of PricewaterhouseCoopers network. The financial data as of December 31, 2011 and 2012 is derived from our audited consolidated financial statements that are not included in this annual report, which were also audited by PwC.

We have not included selected financial data as of and for the year ended December 31, 2010, as we began presenting our financial statements in accordance with IFRS for the fiscal year ending December 31, 2012, with an official IFRS “adoption date” of January 1, 2012 and a “transition date” to IFRS of January 1, 2011. Based on such adoption and transition dates, we were not required to prepare financial statements in accordance with IFRS as of and for the year ended December 31, 2010 and therefore are unable to present selected financial data in accordance with IFRS for this period without unreasonable effort and expense.

We have prepared our annual financial statements for the fiscal year ended December 31, 2014 included herein, in accordance with the accounting principles applicable to a going concern. In our opinion, the issuance of Resolution No. 32/15 in March 2015 by the Argentine Secretariat of Energy (the “SE”) provided a greater degree of certainty with respect to our financial conditions and prospects for 2015 compared to the situation existing prior to its issuance and we understand it constitutes a reasonable basis for the commencement of the RTI. Our independent auditors, PwC, issued a report dated May 12, 2015 on our 2014 financial statements, in which, without qualifying its opinion, they drew attention to the situation explained in Note 1 to our 2014 financial statements (as discussed below) in relation to our economic and financial situation and prospects. Resolution No. 32/15 granted us a temporary increase in income through additional funding from CAMMESA, applicable retroactively as from February 1, 2015, to pay for costs and investments associated with the regular provision of the public service of distribution of energy on account of the future RTI. Although Resolution No. 32/15, Resolution No. 250/13 and Notes No. 6,852/13, No. 4,012/14, No. 486/14 and No. 1,136/14 of the SE have provided additional sources of income, most of these adjustments have not been incorporated into our tariff structure and if inflation levels during the coming years continue the trend of inflation during 2014, the temporary increase provided by Resolution No. 32/15 may prove insufficient to support the real variation in costs.

 

As discussed in Note 1 to the 2014 financial statements, based on the estimated cost increases and financial projections made by us, in light of Resolution No. 32/15 of the SE, our board of directors understands that financial resources are expected to be available, at least during fiscal year 2015, to cover not only our operating costs and debt interest payments during 2015, but also part of our investment plans, assuming that the payment plan to be agreed upon with CAMMESA under Resolution No. 32/15 for the cancellation of the outstanding debt with the Wholesale Electricity Market (the “WEM”) takes into consideration our expected capacity to generate surplus cash flows to service such outstanding debt with the WEM. Compliance with our investment plans will depend on whether the Argentine government continues funding our investment plans (see “Item 5.  Operating and Financial Review and Prospects – Liquidity and Capital Resources – Sources and Uses of Funds”). Although these temporary measures decreased the degree of uncertainty surrounding our financial capacity for the 2015 fiscal year, our board of directors believes that the sustainable recovery of the economic and financial equation of the public service we render, will fundamentally depend on the application of a RTI that takes into consideration the permanent development of operating costs, allows for the payment of the required investments to meet the increasing demand with the quality levels stipulated in the Concession Agreement, makes it possible to have access to financing sources and cover the corresponding costs and allows, at the same time, for the generation of a reasonable return on investments. See “Item 3: Key Information - Risk Factors - Risks Relating to Our Business - Failure or delay to negotiate further improvements to our tariff structure, including increases in our distribution margin, and/or to have our tariffs adjusted to reflect increases in our distribution costs in a timely manner or at all, has affected our capacity to perform our commercial obligations and could also have a material adverse effect on our capacity to perform our financial obligations.”

 

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The losses recorded by us as of December 31, 2014 exceed 100% of our reserves and more than 50% of our capital stock. As a result, as of December 31, 2014 we were subject to compliance with the provisions of Section 206 of the Argentine Corporations Law which provides for a mandatory capital stock reduction in such cases. However in our shareholder’s meeting held on April 28, 2015 it was decided not to proceed with the mandatory stock reduction, considering the better results in the first quarter of 2015 and our board of directors was instructed to assess whether in succeeding quarters the Company qualifies for mandatory capital stock reduction and convene, in such case, an extraordinary shareholders’ meeting to reconsider this issue. See “Item 18: Financial Statements.” 

Our 2014 financial statements are included in this annual report beginning on page F-1.

In accordance with the decision of the board of directors to divest and sell the subsidiary Aeseba as of March 31, 2013 and the subsidiaries Emdersa Holding S.A. (“Emdersa Holdingˮ or “EHSA”), including Emdersa and its subsidiaries, Empresa Distribuidora de San Luis S.A. (“Edesal”), Empresa Distribuidora de La Rioja S.A. (“Edelar”), Empresa Distribuidora de Salta S.A. (“Edesa”) and Emdersa Generación Salta S.A. (“EGSSA”), as of December 31, 2011, we have classified the corresponding assets and liabilities associated to these subsidiaries in the consolidated financial statements as of December 31, 2012 and 2011 as “Assets of disposal groups classified as held for sale” and “Liabilities of disposal groups classified as held for sale”. As of October 11, 2011, October 25, 2011 and May 10, 2012 the Company sold its direct and indirect stake in EGSSA, Edesal and Edesa, respectively. The corresponding charges to results have been included within “Loss (profit) from discontinued operations” line item in our consolidated statements of comprehensive loss for the years ended December 31, 2012 and 2011. As of April 5, 2013, the Company sold its stake in Aeseba. The corresponding charges to results have been included within “Loss from Discontinued operations” line item in our consolidated statements of comprehensive loss for the year ended December 31, 2013.

 

In this annual report, except as otherwise specified, references to “$”, “U.S.$” and “Dollars” are to U.S. Dollars, and references to “Ps.” and “Pesos” are to Argentine Pesos.  Solely for the convenience of the reader, Peso amounts as of and for the year ended December 31, 2014 have been translated into U.S. Dollars at the selling exchange rate for U.S. Dollars quoted by Banco de la Nación Argentina (the “Banco Nación”) on December 31, 2014, which was  Ps. 8.551 to U.S. $1.00, unless otherwise indicated. The U.S. Dollar equivalent information should not be construed to imply that the Peso amounts represent, or could have been or could be converted into, U.S. Dollars at such rates or any other rate. See “Item 3. Key Information - Exchange Rates” and “Item 3.  Key Information - Risk Factors - Risks Relating to Argentina - Fluctuations in the value of the Argentine Peso could adversely affect the Argentine economy, which could, in turn adversely affect our results of operations.”

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, any discrepancies between the totals and the sums of amounts are due to rounding.

 

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Statement of comprehensive (loss) income *

 

 

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Statement of comprehensive (loss) income * (continued)

 

(*)       Certain amounts of the presented financial data for comparative purposes (2013, 2012 and 2011) have been reclassified (with regard to the consolidated financial statements as of such dates) following the disclosure criteria used for the financial statements as of December 31, 2014, mainly due to discontinued operations.

(1)     Revenue from operations is recognized on an accrual basis and derives mainly from electricity distribution. Such revenue includes electricity supplied, whether billed or unbilled, at the end of each year, and has been valued on the basis of applicable tariffs and the charges determined by the Resolution 347/12.

(2)     Includes interest on cash equivalents for the years ended December 31, 2014, 2013 and 2012 for Ps. 3.4 million, Ps. 2.9 million and Ps. 32.6 million, respectively. Also includes net interest relating to the CMM and the PUREE for Ps.157.8 million in 2014 and Ps. 197.5 million in 2013.

(3)     Net of interest capitalized at December 31, 2014, 2013, 2012 and 2011 for Ps. 100.1 million, Ps. 24.5 million, Ps. 25.4 million and Ps. 16.1 million, respectively.

(4)     Each ADS represents 20 Class B common shares.

 

 

 

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Statement of financial position

 

 

(1)       Includes the amounts collected through the Program for the Rational Use of Electricity Power (PUREE). As of December, 31, 2014 and 2013 net of Ps. 2,235.1 million and Ps. 1,661.1 million, respectively, compensated pursuant to Resolution 250/2013 and Notes 6852/2013, 4012/14, 486/14 and 1136/14, which as of December 31, 2014, 2013, 2012 and 2011 amounted to Ps. 17.5 million, Ps. 108.6 million, Ps. 1,352 million and Ps. 928.7 million, respectively, included under current and non-current liabilities. Edenor is permitted to retain funds from the PUREE that it would otherwise be required to transfer to CAMMESA according to Resolution SS.EE. 1037/07.

 

 

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Cash flow

 

 

  

 

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Cash flow (continued)

 

 

 

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(1)       Wheeling system charges represent our tariffs for large users, which consist of a fixed charge for recognized technical losses and a charge for our distribution margins but exclude charges for electric power purchases, which are undertaken directly between generators and large users.

(2)       Represents energy consumed internally by us and our facilities.

(3)       We define a customer as one meter. We may supply more than one consumer through a single meter. In particular, because we measure our energy sales to each shantytown collectively using a single meter, each shantytown is counted as a single customer.

 

 

 

 

 

EXCHANGE RATES

                                                                                                                       

From April 1, 1991 until the end of 2001, the Convertibility Law established a fixed exchange rate under which the Central Bank of Argentina (Banco Central de la República Argentina, the “Central Bank”) was obliged to sell U.S. Dollars at a fixed rate of one Peso per U.S. Dollar (the “Convertibility Regime”).  On January 6, 2002, the Argentine Congress enacted the Public Emergency Law No. 25,561 (the “Public Emergency Law”), formally putting an end to the Convertibility Regime and abandoning over ten years of U.S. Dollar-Peso parity.  The Public Emergency Law grants the Executive Branch of the Argentine government the power to set the exchange rate between the Peso and foreign currencies and to issue regulations related to the foreign exchange market.  The Public Emergency law has been extended until December 31, 2015.  For a brief period following the end of the Convertibility Regime, the Public Emergency Law established a temporary dual exchange rate system.  Since February 2002, the Peso has been allowed to float freely against other currencies, although the government has the power to intervene by buying and selling foreign currency for its own account, a practice in which it engages on a regular basis.